KITE Stock: Waiting for a Trigger
I am focusing on Kite Pharma Inc (NASDAQ:KITE) stock because it is painting quite a compelling picture. This compelling picture is worth keeping an eye on, because it has the potential to send KITE stock surging higher. I have been focusing on the biotech sector because there have been a number of bullish developments within this sector that are beginning to suggest that a rise is in order. If a rising tide is in order, then the adage “a rising tide raises all boats” applies to this investment too, and it increases the odds that the compelling picture on the Kite Pharma stock chart will play out.
For those who haven’t read any of my previous publications, it is worth noting that I generate my views on an investment by analyzing a company’s price chart. This method of analysis is called technical analysis. This is a method of investment analysis that is based on historical price and volume data, which is then used to make trading decisions.
The following price chart illustrates the annotated developments that have occurred on the Kite Pharma stock chart.
Chart courtesy of StockCharts.com
Right off the bat, it is easy to spot that the most important price point on the chart is the $90.00 level that is marked as resistance. This is the level that KITE stock needs to conquer. Once KITE shares breach this level, much higher prices are likely to follow.
The price action that went in setting up this level of resistance has been very constructive. Constructive price action consists of an alternating two-wave structure. This two-wave structure is an essential building block in a trending investment. Think of this wave structure as taking two steps forward and one step back; over time, you will get forward progress.
The first wave that makes up this two-wave structure is an impulse wave, and its object is to move price. This can come in the form of an advance or a decline. The second wave is a consolidation wave, and its objective is to alleviate overbought conditions and, more importantly, set up the next impulse wave.
Impulse waves are short in nature, but this is where all the gains are made in a bullish trend. The current wave structure illustrates this concept quite well. The impulse wave was only seven months in development, while the consolidation wave that followed is already 29 months in development and still counting. I tend to focus much of my attention on consolidation waves, because they set up the next impulse waves, and the gains created in an impulse wave are what I am trying to capture.
Once KITE shares breach the $90.00 level, another impulse wave is set to develop and much higher prices are likely to follow.
The following KITE stock chart illustrates the most recent developments that are occurring within the consolidation wave.
Chart courtesy of StockCharts.com
This price chart contains a much better example of the two-wave structure that is contained within constructive price action.
In November 2016, KITE shares bottomed, and an impulse wave quickly developed. A consolidation wave followed. It was in development for two months before price exited the wave in an upward direction, suggesting that an advancing impulse wave was set to develop. KITE stock did a quick backtest of resistance outlined by the consolidation wave before an impulse wave took hold, and Kite Pharma shares quickly surged higher by $30.00 in the last few days of February.
This surge higher caused a golden cross to develop. A golden cross is a bullish indicator that is created when the faster 50-day moving average crosses above the slower 200-day moving average. This indicator is not to be taken lightly because it serves to suggest that a bull market is now in development.
Kite Pharma stock is now once again within the confines of a consolidation wave. As the pattern develops, you can see how the pattern serves to unwind overbought conditions as the moving average convergence/divergence (MACD) indicator is approaching the zero line. If you’re not familiar with the MACD, it is an indicator that uses signal-line crosses to distinguish between bullish and bearish momentum.
This indicator has been in bearish alignment since the impulse wave completed its advance. It correctly suggested that lower prices were likely to prevail, which has been influenced by bearish momentum.
A bullish MACD cross would serve to suggest that a higher share price is likely. This bullish event would most likely cause Kite shares to exit the consolidation pattern in upward direction, putting the $90.00 level to test once again.
I have the inclination to believe that the next test of $90.00 will be a successful venture, and a much larger impulse wave will develop. This reason alone is why Kite Pharma stock is worth watching.
Bottom Line on Kite Pharma Stock
I am watching the developments on the Kite Pharma stock chart because there is potential for a sizable move in price to occur. This view of the potential for a bullish move was generated by analyzing indications on the KITE stock chart. I am awaiting a successful break above $90.00 to indicate that much higher stock prices are on the horizon.